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India’s burgeoning solar pipeline defies sceptics

India’s utility scale solar project pipeline is growing rapidly, bringing the government’s ambitious solar goals closer. The installed capacity stands at 4.4 GW and projects under development and allocation stand at an additional 10.9 GW. The pipeline number is expected to swell further as new tenders are released. Accounting for policy uncertainties and delays, these developments can place India solidly in the 4-6 GW a year capacity additions range between 2016 and 2019, while leaving room for a potential upside. While the market might still fall short of the 60 GW target for utility scale projects, this market growth would make India a key global market over the next few years. Depending on the performance of the Japanese market, India could become the third or the fourth largest solar market in the world.

The Government has recently issued a notification removing the power generated by more than 25 year old NTPC plants from the existing PPAs, opening an important source of unbundled power

Tenders for project development and EPC issued by SECI and NTPC add up to 3.9 GW, and several new tenders are expected

Projects adding up to 7 GW are either under development, have been allocated or are under allocation at state level; several new allocations are being planned.

Based on recent announcements, it seems that the public sector company National Thermal Power Corporation (NTPC) is going to play an increasingly important role in helping India achieve its targets. In its last earnings conference call towards the end of August, NTPC announced that it wants to develop 15 GW of solar by 2019 (refer). The Government has recently issued a notification removing the power generated by more than 25-year-old NTPC plants from the existing PPAs. This power can now be bundled with the solar power generated by the NTPC and will be sold at a bundled rate. This is an important development from the solar market perspective. The company has already started work on a 250 MW project and has published EPC tenders for an additional 1,260 MW. Based on the availability of solar parks, more tenders can be expected soon.

In parallel, NTPC is also allocating projects to private developers under the National Solar Mission (NSM). Initially, it plans to help allocate 3 GW. Of this, tenders for 1,750 MW have already been announced. Additional tenders are expected over the next few months. A tender for 1,000 MW from this bucket is expected to be for a dollar denominated bid.

At the same time, the Solar Energy Corporation of India (SECI) has been tasked with allocating another 2 GW to private developers. Of this, tenders for 750 MW have been announced (refer) and more tenders across different states are expected soon. SECI has also been given the mandate to develop its own projects and support other PSUs with their developments. It is already developing a 750 MW project in Madhya Pradesh.

Projects under development, recently concluded allocations and ongoing allocations at the state level add up to 7 GW. The new allocations from this are spread across states such as Punjab (500 MW), Haryana (150 MW), Bihar (150 MW), Tamil Nadu (1,240 MW), Telangana (2,000 MW) and Madhya Pradesh (300 MW). More state level tenders are coming up in Maharashtra, Karnataka, Gujarat and Uttar Pradesh.

With the closing gap between tariffs for power from green field thermal, wind and solar projects, the demand for new solar projects in India is here to stay. The government backed procurement of power is already augmented by captive consumption or business-to-business sale of power. According to BRIDGE TO INDIA research, a capacity of 300 MW of solar has already been commissioned for private consumption through open access.

With the growth of utility scale solar more or less secured for the next few years, the active interest from global suppliers, developers and investors seems justified. However, the Indian market remains complex and we need to be mindful of remaining challenges, especially the low project margins.